How do I set up a general partnership in Switzerland? - Complete guide 2025

What is a General Partnership (Kollektivgesellschaft/KLG)?

A general partnership (Kollektivgesellschaft) is a partnership between two or more natural persons who want to jointly operate a business.

Key Statistics:

• 2022: Nearly 1,400 new general partnership formations (less than 3% of all formations)
• 2020: Approximately 15,400 active general partnerships in Switzerland
• Distribution: Mainly in primary sector (1/3) and tertiary sector (2/3)

Who is a General Partnership Suitable For?

Typical Industries:

• Craft businesses
• Restaurants and hospitality
• Local trading companies
• Service companies with strong personal connection

Ideal Prerequisites:

• Two or more founders
• Activities strongly linked to the owners
• Small companies with joint management

Capital and Liability

Minimum Capital:

• No minimum capital required
• No capital contribution necessary

Liability Rules:

• Primary Liability: Business assets of the general partnership
• Secondary Liability: All partners have unlimited liability with personal assets
• Joint and Several Liability: Creditors can demand entire debts from one partner
• No additional contributions required

Formation Costs and Fees

Mandatory Costs:

• Commercial Register Entry: CHF 200 to CHF 300
• Social Security Registration: Free of charge

Total Costs:

• Minimal formation costs (only Commercial Register fees)
• With service providers: CHF 150 fixed price (additional to Commercial Register fees)
• Possibility of free formation with partner offers

Required Documents

Basic Documentation:

• Partnership Agreement (can also be concluded tacitly)
• Commercial Register Application with following information:
  • Company name
  • Domicile and address
  • Business purpose
  • Domicile acceptance declaration (for c/o address)

Company Name - Rules and Regulations

Legal Requirements:

• Name must be truthful and not misleading (Art. 944 Para. 1 Code of Obligations)
• Suffix "KLG" or "Kollektivgesellschaft" mandatory (Art. 950 Code of Obligations)
• Clear distinction from existing company names required

Name Options:

• Person-related names
• Activity-related designations
• Fantasy names

Availability Check:

• Central Company Index (Zefix): www.zefix.ch
• Trademark register check recommended

Accounting Obligations

Simple Accounting (under CHF 500,000 annual turnover):

• Income and expense statement
• Record asset position
• "Milk booklet accounting" sufficient

Double-entry Accounting (from CHF 500,000 annual turnover):

• Create balance sheet
• Maintain income statement
• Prepare notes
• Legal basis: Art. 957ff. Code of Obligations

Profit Distribution and Loss Participation

Profit Participation:

• Regulation according to partnership agreement (Art. 559ff. Code of Obligations)
• Each partner entitled to:
  • Profit share
  • Interest
  • Remuneration of the business year

Loss Participation:

• Losses reduce capital shares
• Remuneration and interest claims remain on reduced capital portion
• Profit distribution only after complete loss coverage

Insurance and Social Security

Mandatory Registrations:

• Social security recognition as self-employed
• Pay social security contributions
• Registration required even for secondary employment

Recommended Insurance:

• Professional liability insurance (industry-specific)
• Business liability insurance
• Legal protection insurance
• Loss of earnings insurance

Formation Process - Step by Step

1. Preparation Phase:

• Develop business idea
• Determine partners
• Make legal form decision

2. Document Creation:

• Draft partnership agreement
• Create formation documents
• Check and reserve company name

3. Official Steps:

• Have signatures certified
• Apply for Commercial Register entry
• Complete social security registration

4. Operational Preparation:

• Open business account
• Conclude insurance policies
• Set up accounting system

Advantages and Disadvantages Overview

Advantages:

• No minimum capital required
• Simple formation possible
• Flexible profit distribution
• Joint business management
• Low formation costs

Disadvantages:

• Unlimited personal liability
• Joint and several liability of all partners
• Dependency on co-partners
• Limited capital procurement
• Dissolution upon partner withdrawal

Frequently Asked Questions (FAQ)

Can a general partnership be formed tacitly?

Yes, a general partnership is created simply by appearing together under a company name, even without a written contract.

Is Commercial Register entry mandatory?

Yes, Commercial Register entry is mandatory for general partnerships, but has only declaratory effect.

Can legal entities become general partnership partners?

No, only natural persons can be partners in a general partnership.

What happens when a partner withdraws?

The general partnership basically dissolves, unless a continuation clause is agreed in the partnership agreement.

Comparison with Other Legal Forms

General Partnership vs. Limited Liability Company (LLC):

Choose General Partnership for:

• Simple business operations
• Strong personal involvement
• Low capital requirements
• Flexible management structure

Choose LLC for:

• Limited liability protection
• Professional business appearance
• Capital raising needs
• Long-term business planning

General Partnership vs. Limited Partnership:

General Partnership advantages:

• All partners can manage
• Equal decision-making rights
• Simpler structure

Limited Partnership advantages:

• Limited liability for silent partners
• Easier capital procurement
• More flexible investor participation

Legal Framework and Compliance

Commercial Register Requirements:

• Mandatory registration for all general partnerships
• Publication in Swiss Official Gazette of Commerce (SHAB)
• Annual updates of changes required

Tax Obligations:

• Direct federal tax on business profits
• Cantonal and municipal taxes
• VAT registration from CHF 100,000 turnover
• Partners taxed individually on their profit shares

Employment Law:

• Partners are self-employed (not employees)
• Employee regulations apply to hired staff
• Social security contributions required for partners

Dissolution and Liquidation

Dissolution Triggers:

• Mutual agreement of all partners
• Expiry of agreed term
• Partner withdrawal (unless continuation clause exists)
• Death or incapacity of a partner
• Court order in special circumstances

Liquidation Process:

• Asset valuation and debt settlement
• Distribution according to partnership agreement
• Commercial Register deletion
• Final tax declarations

Expert Tips for Success

1. Comprehensive Partnership Agreement:

• Define profit and loss distribution clearly
• Include decision-making procedures
• Plan for partner withdrawal scenarios
• Specify management responsibilities

2. Risk Management:

• Adequate insurance coverage essential
• Regular financial monitoring
• Clear separation of business and private assets
• Professional legal and tax advice

3. Operational Excellence:

• Establish clear roles and responsibilities
• Implement proper accounting systems
• Regular partner meetings and communication
• Professional business management practices

Conclusion

The general partnership is suitable for small to medium-sized businesses with multiple owners seeking a simple and cost-effective legal form. However, unlimited liability requires careful consideration and appropriate insurance coverage.

Key Success Factors:

• Compatible partners with complementary skills
• Clear agreements on roles and profit sharing
• Adequate insurance protection against liability risks
• Professional business management and accounting

Recommendation:

Consult with a specialist before formation to choose the optimal legal form for your venture. Consider the long-term implications of unlimited liability and ensure all partners understand their responsibilities and risks.

The general partnership remains a viable option for traditional businesses where personal involvement and simple management structures are valued over limited liability protection.